BP, Rosneft Sign SPAs for TNK-BP Transaction (Russia)

BP, Rosneft and Rosneftegaz — the state-owned parent company of Rosneft — have signed definitive and binding sale and purchase agreements (SPAs) for the sale of BP’s 50 per cent interest in TNK-BP to Rosneft and BP’s investment in Rosneft. BP and Rosneft agreed heads of terms for this transaction on October 22.

The SPAs were signed after the Russian Government approved BP’s purchase from Rosneftegaz of a 5.66 per cent stake in Rosneft for $4.8 billion, as an integral part of the transaction.

On completion, the net result of the overall transaction will be that BP will receive $12.3 billion in cash and acquire an 18.5 per cent stake in Rosneft for its stake in TNK-BP. When combined with BP’s current 1.25 per cent shareholding, this will result in BP owning 19.75 per cent of Rosneft.

Completion of the transaction is subject to certain customary closing conditions, including governmental, regulatory and anti-trust approvals. The two companies still anticipate completion in the first half of 2013.

An agreement last week between BP and AAR, the other shareholder in TNK-BP, lifted restrictions on BP’s ability to engage with Rosneft before completion. BP and Rosneft have now begun discussions on how BP can best support Rosneft’s strategic priorities, both as an investor and a strategic partner

Under the terms of the SPAs, the proposed transaction consists of two  tranches, intended to complete on the same day. BP will sell its 50 per cent shareholding in TNK-BP to Rosneft for $17.1 billion in cash and shares representing a 12.84 per cent stake in Rosneft. BP will then use $4.8 billion of these cash proceeds to purchase an additional 5.66 per cent stake in Rosneft from the Russian Government.

With a holding of 19.75 per cent of Rosneft stock, BP expects to be able to account for its share of Rosneft’s earnings, production and reserves on an equity basis. In addition BP expects to have two seats on Rosneft’s nine person main board.The proposed sale of the TNK-BP shareholding to Rosneft consists of a cash element of $17.1 billion and 1,360,449,797 Rosneft shares. Shares in Rosneft traded at close of business on the bid date (18 October 2012) at $7.13 and at close of business on 21 November 2012 at $7.98

Related:

BP, AAR Resolve Disagreements

Russia, A Home to The Second Largest Oil Deal in History?

BP Signs Heads of Terms to Sell Its TNK-BP Stake to Rosneft, Russia

November 23, 2012